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Friday, December 4, 2015

Can You Teach Entrepreneurship?

It's a tricky problem for formal education

Entrepreneurship programs are spreading rapidly across America and are attracting a growing number of students. But one question keeps coming up: Is it really possible to teach entrepreneurship? 

The answer is both yes and no. 

Entrepreneurship can be many things. The practical how-to of starting and running a business can be taught, and so can the logic of how to think about business opportunities. And although the key element of opportunity recognition probably lies beyond the capability of formal education, we can sharpen the skills of students who have that inclination. 

One of the difficulties with studying and teaching entrepreneurship is that it is an elusive concept. The entrepreneur is anything from superhero to struggling small business owner. The entrepreneur is the innovator, the disruptor of markets, the winner-against-all-odds — but also the common business man, mom-and-pop store owner, franchisee, or even self-employed contractor.

What is entrepreneurship, really? The simple fact is that we aren’t entirely sure. But we’re getting close. 

We know that entrepreneurs embody the market’s change agents; they’re the force that disrupts the status quo, creates value, clears markets, and equilibrates the economy. 

It’s in the process of “creative destruction” that we find the entrepreneurs — both as visionaries who bring radical change and as everyday producers who work far from the limelight with constant but marginal improvements. What they have in common is that they produce goods and services under uncertainty. When they succeed, it is because they recognized opportunities that the rest of us didn’t fathom.

The “opportunity” lies at the heart of entrepreneurship research, and is making its way also into teaching. While an important concept, it also underlines the difficulty of teaching entrepreneurship. What exactly is an entrepreneurial opportunity? How do entrepreneurs recognize it? And more to the point, can we learn to “see” or create opportunities and then exploit them?

After recognizing opportunities, they start businesses. This practice has traditionally been taught in business schools, and involves putting together a business plan, doing market analysis, and making forecasts for a specific market segment. 

This is important — the craft of entrepreneurship. It takes knowledge and skill to play the game well. 

A surprisingly large part of business skills relates to understanding and meeting requirements placed on businesses by government and its agencies. 

As a budding entrepreneur, you need to figure out how to start your business, what licenses are required, how to keep track of your cash-flow, and when and how to pay your taxes. 

The vast number of legal restrictions on business create a mine field for the entrepreneur and a burden that must be carried when starting and running a business. Entrepreneurship includes handling employees, leading the business, knowing the rights and duties you have toward your employees, suppliers, customers, and contractual partners. 

There are non-governmental “musts” as well. 

Entrepreneurship includes identifying your customers, what price you can charge, and how to secure funding for your business prospect. Banks commonly require a formal business plan to consider a loan application, investors need forecasts, and others require that you sell or pitch your business idea. Skills on how to conduct market research, estimate turnover and profitability, form an effective team, and how to price your product are also teachable and we cover them in our Entrepreneurship and Emerging Enterprise curriculum at Oklahoma State.

But there is a crucial element of entrepreneurship that no one has figured out exactly how to teach because it involves tacit knowledge: the creativity and imagination that are necessary components to recognizing an opportunity. We might call it entrepreneurial judgment

This is surprisingly akin to the traditional object of liberal education: to develop analytical skills or “critical thinking.” To be successful in entrepreneurship, which deals with the unknowns of future market situations, the most important quality is the understanding or “gut feel” for where an opportunity will present itself. 

This requires alertness to trends in the market place and especially the ability to imagine the future. 

Particularly important in this is our Imagination in Entrepreneurship course (EEE 3663). Students learn to understand market processes through small-scale startup projects and by meeting with members of the entrepreneurial community. We use in-class exercises that are designed to provoke and tease their imaginative thinking and test their boundaries. We push them out of their comfort zones asking “why” and “what if” and turning their reasoning upside down. 

All of these important skills are developed and strengthened in in-class, hands-on exercises in the classroom and beyond. The purpose is to produce students who are willing and able to learn from failure, who are not afraid to fail, and who are excellent thinkers and doers.

Students in 3663 have had some considerable successes, such as Billy Goat Ice Cream, a startup begun by two students. Another is Life Out of the Box, an idea two students refined after taking 3663 online. And of course, not all entrepreneurial ideas work out. One student thought that workout pants made of bamboo would fly, but it didn’t and he gave it a mercy killing. A huge part of entrepreneurship is learning from failure.

Entrepreneurship education changes the role of the business school — from supplier of skilled labor through vocational training in business matters to an application of the enlightened citizen ideal within the realm of business and market. 

Perhaps this provides an answer the question of whether entrepreneurship, seen as more than the practical skill of starting a business, can be taught in universities. I think it can.

This post first appeared at the Pope Center.

  • Per Bylund is Assistant Professor of Entrepreneurship and Records-Johnston Professor of Free Enterprise in the School of Entrepreneurship at Oklahoma State University.